China Dials Back its Support to Clean Energy Projects as Targets Are Attained Sooner

Beijing will begin rolling back renewable energy project subsidies shortly after it achieved its 2030 renewables targets sooner than expected. The East Asian nation’s total installed capacity for solar has reached 887GW, a whopping 6 times larger than North America’s installed solar capacity, the International Renewable Energy Agency says.

A recent Reuters report said the National Development and Reform Commission (NDRC) is partnering with China’s energy administration to begin rolling back subsidies meant to support the installation of domestic solar energy projects. The move comes a few months after China recorded a historic surge in solar energy installations that helped it meet its end-of-the-decade green energy targets ahead of schedule.

Despite its substantial greenhouse gas emissions, China is undoubtedly at the helm of the global race to adopt green energy. Favorable policies coupled with over a decade of targeted investments have allowed Beijing to monopolize most of the world’s green energy ecosystem. China currently develops most of the world’s photovoltaic solar panels and its solar energy infrastructure dwarfs most, if not all countries.

The NDRC also notes that solar accounts for over 40% of China’s cumulative energy generation capacity, partly because of a pricing system quirk that kept renewable energy rates fixed as solar farms sold their green energy to the grid. According to a statement from the agency, new energy development costs have seen a major fall compared to prior stages.

However, the statement indicated that solar projects reaching completion after June 2025 will use a “market-based bidding” system to handle electricity payments. The NDRC expects the transition to this new payment system will have no effect on residential and agricultural electricity prices while commercial and industrial operations will continue paying relatively similar electricity costs.

Once China finishes phasing out the subsidies for green energy projects, its solar industry will likely face increasing pressure to fulfill the country’s growing demand for solar. Falling solar prices coupled with overcapacity have already made it quite difficult for smaller companies to reach profitability and the manufacturers could drop out of the market once the subsidy tap runs dry.

In the meantime, China is focusing its efforts on improving and upgrading its grid to ensure it is ready to transition to renewables. Issues with grid connections prevent solar farms from connecting to the grid and often lead to massive backlogs where projects have lots of green energy but can’t transport it to customers.

Beijing increased its investment into the national grid to support the green transition last month to ensure solar projects can deliver renewable energy to homes and businesses as efficiently as possible.

As more countries follow in the tracks of China and move closer to attaining their green energy goals, the commodities market is likely to see a surge in the demand for the energy transition metals focused on by companies like First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF).

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